Variable manufacturing costs are $126 per unit, and fixed manufacturing costs are $157,500. Sales are estimated to be 10,000 units. If an amount is zero, enter "0". a. How much would absorption costing income from operations differ between a plan to produce 10,000 units and a plan to produce 15,000 units

$52,500

Explanation:

                           Plan - 1     Plan - 2      

Units produced            10,000    15,000      

Variable Manufacturing cost $126    $126      

Fixed manufacturing cost    $15.75    $10.50      

($157,500 ÷ Units produced)        

Unit cost           $141.75   $136.50

Working note

Fixed manufacturing cost for Plan A = $157,500 ÷ 10,000

= $15,75

Fixed manufacturing cost for Plan B = $157,500 ÷ 15,000

= $10.50

Unit costfor Plan A = $126 + $15.75

= $141.75

Unit costfor Plan B = $126 + $10.50

= $136.50

Income under two plans different for the amount as below      Number of units in ending inventory in Plan -2 = 5,000 units    

(i.e. 15000 units produced - 10,000 units sold)      

Fixed manufacturing of per unit = $10.5      

Difference in Income in two plans under Absorption costing = 10,000 × $10.5

= $52,500

Variable costing          

Therefore, there will be no difference in income of Two plans under Variable costing.

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